Dive Brief:

• Lidl’s entry into the U.S. market could put further pressure on an already embattled Whole Foods, deepening the company’s struggles to return to comp store sales growth, according to Seeking Alpha financial blogger David Zanoni.
• Lidl offers low prices on many of the same organic and health-focused offerings Whole Foods carries, and has been described as a cross between Wal-Mart and Trader Joe’s.
• Whole Foods will likely need to close more stores but continue opening more of its 365 discount stores, according to Zanoni.

Dive Insight:

Lidl’s U.S. debut is poised to disrupt numerous retailers, but Whole Foods may feel the most impact thanks to the German chain's low-priced array of healthy offerings.

This is troubling news for Whole Foods, which has seen its core advantages erode in recent years as more and more companies offer natural and organic products. The chain has endured six straight quarters of comp sales decline, and as a result has had to cut its forecast, close stores and revise its growth strategy to focus more on promotions and data targeting its most loyal customers.

Focusing on its core customers seems like the right move, but how much growth can Whole Foods expect to squeeze out of the already-converted? The company needs to attract new shoppers, and right now it’s losing them to alternative formats. The two best bets for growth seem to be the 365 format stores, which appeals to budget-conscious millennials, and the chain’s e-commerce offerings.

Shoppers and retail analysts have long been critical of Whole Foods’ prices. The company has done a lot to improve its image here in recent years, but is still vulnerable to the level of price competition that Lidl will serve up. With its limited selection of mostly private label goods, the German discounter is able to offer fresh, high-quality products without sacrificing quality. Its smaller size and focus on easy-to-navigate aisles, meanwhile, may offer up a no-frills contrast to Whole Foods’ reputation for excess.